Notwithstanding this bear market, Web3’s more pressing issue is its inability to handle large volumes, writes Greg Gopman. Can sidechains offer a solution?
The unsolved issue with the cryptocurrency industry is not actually price volatility (and I say this after a trillion-dollar market crash followed by the current “crypto winter”) but scalability. Time and time again, we have seen promising projects beset with scalability issues.
This is the case even for layer-1 blockchains built on a proof-of-stake model, regardless of whether it’s a delegated proof of stake, leased proof of stake, regular proof of stake, masternode proof of stake, or otherwise. We thought PoS was the answer before we had the transaction volumes we have today, now we know more is needed.
The Web3 scalability dilemma
A scalability issue is one where a project “succeeds” up to a certain point, and then cannot sustain further growth. This is due to either a lack of infrastructure (nodes) or a validation mechanism that is not strong enough (some initial designs are better suited to sustainable growth than others).
Ethereum transaction fees have been sky-high for a long time. Network upgrades and additional layers like Plasma have not been at all effective despite much hype. Bitcoin also experienced periods of severe network congestion and is just not suited to global adoption due to its inherent proof-of-work design.
The Web 3.0 gaming industry is one where scalability issues are most obvious to see, and the problems are chain-agnostic. Games on Ethereum such as CryptoKitties and Axie Infinity have suffered heavily, as well as DeFi Kingdoms on Harmony. Solana has continual network congestion issues from general use, aside from gaming. What’s the point of embarking on an ambitious project that fails the moment it succeeds with higher volume?
Sidechains to the rescue
Right now, sidechains may be the best solution to the scalability problem, by a wide margin. All of the leading blockchains in the industry are exploring these sidechains, though they all have their own distinct vernacular.
Polygon calls them SuperNets, Avalanche calls them SubNets, Ankr calls them Side Chains, and Binance calls them Binance Application Sidechains (BAS). Others might call them “application-specific blockchains” (ASBs). Regardless of what you want to call them, you can expect to hear a lot about these sidechains in the years to follow. Because they could well represent the future of Web3.
With all of the issues in Web3 gaming, there is a “one game one chain” ethos that has gained enormous traction. And with the rise of gaming as a legitimate way to earn an income, players will need a dedicated chain, most likely a sidechain of a proven network. dApps with heavy usage will need their own chain, especially to preserve the main chain (as seen when games such as CryptoKitties raised Ethereum transaction fees).